The meltdown at one of Silicon Valley's hottest young VCs could lead to more investigations, source says

The implosion of Rothenberg Ventures, a venture firm known for
its over-the-top parties and spending — as well as its young,
charismatic founder, Mike Rothenberg — appears to have taken
another dark turn.

The company admitted to its investors that the Securities and
Exchange Commission was looking into the company,
according to an email obtained by Business Insider, although
such inquiries do not automatically mean that any further action
will be taken. At issue is how the company managed its money.

Now the SEC has asked people familiar with the company to speak
to the FBI and the US Attorney's office, a person close to the
matter told us, which could mean that more investigations are
being considered. Again, that doesn't mean this will result in a
full-blown investigation or formal charges.

A representative from Rothenberg Ventures, now called Frontier
Tech, told us, "The company is not aware of any criminal
investigation.

In addition, sources tell Business Insider that multiple
employees have filed wage complaints against the company with the
state of California.

The firm, which had about $50 million under management, ran out
of operating money, and all its employees except its lawyer were
told they were put on "unpaid leave" as of mid-August, according
to a lengthy
account of the firm's troubles on Backchannel.

An employee we talked to more aptly described the situation as
being "unemployed."

"You put yourself on unpaid leave. You can't put a company on
unpaid leave," one person told us.

Rothenberg was "obsessed with being famous" and his own
reputation, this person said. The company was known for its
extravagance: wine tours of Napa Valley, sports events in luxury
boxes, a race
car, and its Founder Field Day, where it rented the Giants
stadium, AT&T Park, and treated startup founders to batting
practice on the field and free massages.

Last year, Bloomberg ran a story that questioned how the firm was
paying for its
"party" culture. After the story was published, Rothenberg
sent multiple employees to the local airports so they would buy
up all the copies of the issue, TechCrunch reported and one
person confirmed to us.

Another person told us that at least two times Rothenberg changed
his mind and rescinded a job offer at the last minute, even after
the would-be employee had left another job or moved from another
state.

Rothenberg's representatives declined to comment on these
allegations.

We heard multiple allegations of wage disputes, too. As
Backchannel
and TechCrunch reported, one employee filed a lawsuit
alleging that Rothenberg had refused to reimburse $109,000 worth
of expenses.

Nervous startup founders

None of the startup founders backed by Rothenberg that we reached
out to responded to requests for comments.

But former employees told us that many might still feel loyal to
Rothenberg because he invested in them when others wouldn't.

But some of them could be nervous as well. Matt Mireles, a CEO
coach, published a blog about a conversation he had with one of Rothenberg's
founders:

"The founder was young. No professional experience outside of a
couple menial summer jobs. But the business was surprisingly
solid and well thought out. ... He'd just started raising money
again. And here was his lead investor, the only brand name on a
cap table littered with unsophisticated friends, family and
randoms, going through a very public meltdown at the worst
possible time."

Mireles advised the founder to find out if the investment note
could be called or the stake could be sold — and beyond that, to
simply step up, be honest about the connection, and take it on
the chin.

It looks as though a lot of other folks involved in the company
will need to take that same advice.